If there were only 4 economists that changed the world, it would be Adam Smith, Thomas Malthus, David Ricardo, and Carl Marx.
Adam Smith fascinates me the most. His most famous piece of work is the "Wealth of Nations," published in 1776. He preached that money facilitates the exchange of commodities. When trading goods or services, it is ideal to exchange currency. Without an exchange of currency, trading goods or services would be a lot more complicated. How do people make money so they can buy goods and services? Income is made by working for an organization.
The income per head is a data point used to analyze and predict a country's economic growth. Smith was interested in increasing a country's income per head because he hypothesized this would lead to a more prosperous economic frontier. As far as trade is concerned, Adam Smith was a firm believer in free trade. He believes keeping the government out of trade is beneficial because if a government applies tariffs, trade consumption will likely decrease. He would disagree with the current tariffs governments place on other countries today.
One exception Smith believed in is if the two countries involved in a trade are in direct competition, he would advise government tariffs. The rationalization for this can be understood through the steel trade. Steel is produced in the U.S. but is more expensive than importing steel from China. Although it seems smarter to import steel from China because of reducing cost, it can be more advantageous to add a tariff to save American manufacturing jobs. This way, a government can use the extra money towards incentives that promote economic growth. Crafting a product in America, then using the product for American consumption increases income per head; A principle Adam Smith was adamant about.
David Ricardo was an exceptional economic thinker in the late 18th century and early 19th century. He analyzed that as wages increase, profits for a company decrease. Furthermore, because profits decrease in this situation, economic expansion would decrease or come to a halt. Inversely, if wages decrease, profits increase, leading to economic growth. Ricardo came up with a system of balance. When times are good, and the economy is in full swing, wages should increase, and companies should squeeze profits. When an economy is going through a recession or a depression, wages should decrease, and profits should increase. This system supports balance in the economy for growth in both areas at different points in time.
Thomas Malthus was beloved by many economic thinkers and despised by others. His general thesis was all about the land-labor dichotomy. Malthus was afraid of change. Although he was looking out for humankind's survival, his opinions were unpopular among the average man. Malthus preached equilibrium. For equilibrium to be whole, Malthus believed disease, famine, and wars must occur because any sudden population decline would allow more resources for the living. Afraid of a population spike, he believed bad would have to occur in the world for a good result to flourish. His theories were despised and refuted by Carl Marx.
Writing the "Communist Manifesto," Carl Marx's theories traveled around the world. We believed in low wages so profits would rise, and economic growth could continue. Sacrifice for the greater good. He lays out a bargaining theory for business owners to manipulate the income paid to their workers. His key argument is that people won't know their worth, and it is the business owners' job to determine their employees' worth. He insinuates that governments and big corporations should manipulate the market every ten years. In a ten-year cycle, times can be good, and spending is fluent. While in a depressed state, big corporations can lower wages and get away with it because the population thinks lower wages are necessary in this time of despair.
-Dan
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